R1.8 billion in historical expenditure at the City of Johannesburg had already been regularised through governance processes, with a further R6.4 billion before municipal entity boards for consideration.
Image: Nicola Mawson | IOL
National Treasury's decision to temporarily withhold grant funding from Johannesburg has put the financial management of South Africa's largest metropolitan economy under the spotlight.
The city contributes almost 16% of South Africa's gross domestic product and about 40% of Gauteng's economy, according to its website. The city's economy is dominated by financial and business services, retail and wholesale trade, community and social services, and manufacturing, making it the country's largest metropolitan contributor to economic output.
National Treasury this week withheld portions of Johannesburg's equitable share allocation after finding the city had failed to comply with provisions of the Municipal Finance Management Act (MFMA).
"Johannesburg is the economic heartland of this country. The challenges we face are real but not insurmountable... What is new is the discipline, transparency and accountability with which we are now confronting them," Executive Mayor Dada Morero said.
National Treasury said the funding would only be released once the city demonstrated it had a funded budget, a credible financial recovery plan, payment arrangements with major creditors such as Eskom and Rand Water, and measures to address unauthorised, irregular, fruitless and wasteful expenditure.
Responding to National Treasury's decision, Morero said the city had been working with National Treasury through intergovernmental structures and had received confirmation that Johannesburg's 2026/27 budget was funded.
"This is comforting feedback as it confirms that our financial management is okay and has not reached a crisis state. However, more needs to be done to manage our cash flow and revenue performance," Morero said.
The holder of the purse has repeatedly warned that persistent non-compliance with the MFMA threatens not only municipal finances but also the financial sustainability of bulk suppliers such as Eskom and water boards.
It has also linked weak financial management to deteriorating service delivery, growing debt and escalating unauthorised, irregular, fruitless and wasteful expenditure.
The latest Auditor-General findings mirror those concerns. Since the 2021/22 financial year, municipalities have incurred R145.21 billion in irregular expenditure, R24.12 billion in fruitless and wasteful expenditure and R118.13 billion in unauthorised expenditure.
Nearly half of municipalities adopted unfunded budgets in 2024/25, while municipalities owed R3.4 billion in interest to Eskom and R1.21 billion to water boards.
The Auditor-General’s municipalities report for 2024/25 found that City Power incurred R11.8 billion in irregular expenditure since 2021/22. “Since 2021-22, 77% of the R73.9 billion in irregular expenditure incurred by metros and their entities has been due to non-compliance with legislation on procurement and contract management,” the report said.
Morero said City Power's overspending on bulk electricity purchases had become the largest driver of new unauthorised expenditure, amounting to R2.1bn by the end of the third quarter, while acknowledging that the city's billing and revenue systems still required modernisation.
The mayor added that Rand Water and Eskom would be paid by mid-July and that the city's strategy to reduce unauthorised, irregular, fruitless and wasteful expenditure had been revised to align with Treasury's guidance.
Morero said R1.8 billion in historical expenditure had already been regularised through governance processes, with a further R6.4 billion before municipal entity boards for consideration.
The city said it would continue to ring-fence funding for essential services while investing in infrastructure, including a €200 million (about R3.8 billion) facility from German development bank KfW for City Power infrastructure and about R1.75 billion for Johannesburg Water capital expenditure.
“Service delivery remains our priority, with funds recovered through improved collections and cost containment directed toward protecting water, electricity, waste, and public safety services,” Morero said.
The Organisation Undoing Tax Abuse welcomed Treasury's decision to withhold the funding but questioned whether the city would follow through on its commitments.
"The Mayor has outlined what appears to be a sensible roadmap, but Johannesburg residents have heard similar commitments over several years while service delivery has steadily declined and the City's financial position has worsened," said OUTA chief executive Wayne Duvenage.
OUTA urged Treasury not to release the withheld funding until it was satisfied Johannesburg had demonstrated genuine compliance with the prescribed conditions and implemented lasting financial reforms.
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